Analysis of Service Tax Amendments & a Snapshot for Industry

1. BASIS OF CHARGE

QUES1:- WHAT ARE THE ASPECTS WHICH NEED TO BE CONSIDERED TO ASCERTAIN WHETHER I AM PROVIDING ANY SERVICE OR NOT?

Ans:- As per Section 66B (Charging Section), Service tax is levied on all services provided in the taxable territory by one person to another. However, the services specified in the Negative List are not liable to be taxed.

Thus, the charge of service tax has been shifted from “Taxable Service” to “Service”. Presently, any person providing “Service” is liable to pay service tax. In accordance with this, the definition of the term “service” needs special mention. The term has been defined under Section 65B of Finance act’1994.

In simple terms the definition connotes that ‘Service’ means

• Any activity (Term not Defined in act)(In terms of the common understanding of the word, activity would include an act done, a work done, an operation carried out, execution of an act, provision of a facility etc. It is a term with very wide connotation. Thus, anything done will be covered under the term activity)

• For consideration (Term not Defined in act)(In simple term, ‘consideration’ means anything received in return for a provision of service which includes monetary payment and any consideration of non-monetary nature as well as deferred consideration.)

(a) an activity which constitutes merely,––

(i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or

(ii) such transfer, delivery or supply of any goods which is deemed to be sale within the meaning of clause (29A) of article 366 of the Constitution; or (i.e. Deemed Sale)

(iii) a transaction in money or actionable claim;

(b) a provision of service by an employee to the employer in the course of or in relation to his employment;

(c) fees taken in any Court or tribunal established under any law for the time being in force.

Therefore, all types of activities undertaken for another person and for which consideration is received (Whether monetary or Non-monetary) is liable to be taxed. However, the services covered under the following categories are outside the purview of service tax and no service tax is required to be paid. These are as follows:-

(a) Services excluded from the definition of Service {See above clauses (a), (b), (c)}

(b) Services specified under the Negative List {Read Section 66D – 17 Services)

(c) Services specified under Exemption Notifications {Read Mega Exemption Notification No:- 12/2012 Dated 17/03/2012 – 34 Services}

The issue can also be explained with the help of examples below:-

For Example:-

(1) A trader of goods is not liable to pay service tax as he is excluded from the definition of service.

(2) Any person providing services of supplying manpower is liable to pay service tax as he is not covered under any of the above three categories.

(3) Amount charged as a donation is not liable to be taxed as nothing is received in return.

(4) A agrees to construct 3 flats for B on land owned by B and in return B agrees to provide one flat to A without any monetary consideration is liable to be taxed although no consideration is received. The valuation for service shall be as per the Service Tax (Determination of Value) Rules’2006.

(5) A agrees to provide free of cost coaching to B is not liable to be taxed as no consideration is received.

(6) A agrees to pay Rs 1 lac for advertisement in print media to Times of India is not liable to be taxed as this service is covered under the negative list.

(7) A contract for Construction of roads for use by general public is outside the purview of service tax as it is covered under the exemption notification.

Thus, a person must see the lists for all the above three excluded categories and decide whether he is liable to pay service tax or not. If he is covered under any of the aforesaid categories then he is not liable to pay service tax. Apart from the above exclusions, all activities are covered under services tax and tax is liable to be paid on the amount of consideration received.

Basic Exemption available to every person

Furthermore apart from above, there is another Exemption Notification No 06/2005 for Small Scale Service Provider providing services below Rs.10 lakh in a financial year. As per this notification, any person providing taxable services upto the limit of Rs. 10 lakh is not required to charge and pay service tax if the services provided by him in the previous year is upto the limit of Rs 10 lakh. Thus, although the activity comes under service tax, benefit of this exemption also needs to be considered.

QUES2:-WHETHER SERVICES PROVIDED OUTSIDE INDIA I.E. EXPORT OF SERVICES ARE LIABLE TO BE TAXED OR NOT?

Ans:- As per the provisions, service must be provided in the taxable territory i.e. in India excluding Jammu & Kashmir.

In other words any service provided Outside India (i.e. Export of Service) as well as service provided to Jammu & Kashmir is not liable to be taxed.

Further whether the service is Export of Service or not is to be ascertained in accordance with the Place of Provision of Service Rules, 2012 framed in this respect;

2. LIABILITY TO PAY SERVICE TAX

QUES3:- WHO SHALL BE LIABLE TO PAY SERVICE TAX, WHETHER THE SERVICE PROVIDER OR THE SERVICE RECEIVER?

Ans: – Generally, the person providing the service is liable to pay service tax. However, there are certain exceptions to this rule i.e. service recipient is also made liable to pay service tax. This is also known as reverse charge mechanism. Earlier there were five cases which were under this reverse charge mechanism, however, w.e.f. 01/07/2012, by Notification No 15/2012 Dated 17/03/2012, some other cases has also been incorporated. The complete list on which reverse charge is applicable is provided herein below:-

S. No.	Description of a service	Percentage of service tax payable by Service Provider	Percentage of service tax payable by the Service Recipient
1	Services provided by an insurance agent to any person carrying on insurance business	Nil	100%
2	Services provided by a Goods Transport Agency      in respect of transportation of Goods by  Road  where consigner      or consignee is from organized sector.	Nil	100%
3	Services provided by way of sponsorship	Nil	100%
4	Services provided by an arbitral tribunal	Nil	100%
5	Services  provided by an Individual Advocate	Nil	100%
6	Services provided by way of support service by Government or local authority	Nil	100%
7	(a)     Services provided by way of renting or hiring any motor vehicle designed to carry passenger on abated value.	Nil	100 %
	(b)  Services provided by way of renting orhiring any motor vehicle designed to carry passenger on non abated value.	60%	40%
8.	Services provided by way of supply of manpower for any purpose	25%	75 %
9.	Services provided by way of works contract	50%	50%
10	Any   taxable services provided by any person who is located in a non-taxable territory  (Outside   India    and    J&K) and received    by any person located in  the taxable territory	Nil	100%

Thus, the service provider as well as service recipient must take a constant watch in respect of their liability to pay service tax.

NOTE:- It is pertinent to note that the cases specified under S.No 7, 8 and 9 and covered under reverse charge mechanism only if

•  The service is provided by any Individual, HUF or Proprietary Firm or Partnership Firm, whether registered or not, including AOP; located in the taxable territory

• To any Company formed or registered under the Companies Act, 1956 or a Business Entity registered as body corporate located in the taxable territory;

Thus, if the service specified under S.No 7, 8 and 9 is provided by company then the reverse charge shall not apply.

3. TIME LIMIT FOR PAYING SERVICE TAX

QUES4:- WHEN DOES THE LIABILITY TO PAY SERVICE TAX ARISE?

Ans:-

Case-1:- Liability in case of services provided

As per the Rule 3 of Point of Taxation Rules’2011, the liability to pay service tax arise as follows:-

S. No	SITUATION	TIME WHEN LIABILITY ARISES
(i)	Where any advance is received	Time when such advance is received
(ii)	Where the invoice is issued within 30days of   the completion of the provision of service.	The time when the invoice for the service provided is issued.
(iii)	Where the invoice is not issued within 30days of the completion of the provision of service.	The         time        when      the service  is completed

Service tax needs to be paid by 5th/6th (in case of e-payment) of the next month/quarter, on which the liability to pay service tax arise.

Case-2:- Liability in case of services received

The liability to pay service tax under reverse charge mechanism arises only when the payment is made to the service provider i.e. it is not on the basis of issuance of invoice by the service provider. This is with respect to the condition that the payment must be made within 6 month from the date of invoice. (For details kindly refer Point of Taxation Rules’2011)

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By CA Raman Singla (9899834353)

H. No. 1011, L.G.F. Sector 15(II)

Gurgaon- 122 001, Haryana

Office:- 0124-4271552

E MAIL:- caramansingla@gmail.com